Summer, 2003

From the Editor

Policy Without Standard

The battle between the European Union and the United States over appellations of origin is our cover story this issue, but it is scarcely the only dispute bedeviling international trade in the food industry. Just recently talks collapsed on the U.S. effort to open the European Market to genetically modified foods.

The battle over GMOs is in a sense very simple. It has been recognized, at least since the end of World War II, that tariffs reduce trade and economic growth. By denying consumers access to the least expensive goods, they reduce consumer choice. By encouraging assets to be deployed in less productive ways, tariffs impoverish the very nations that impose them.

But the political force for tariffs is great, as they protect existing, identifiable jobs even while costing many more jobs that are never created due to misallocation of resources caused by tariffs.

In order to deal with these circumstances, countries have followed a multilateral approach to reduce tariffs, first under the General Agreement on Tariffs and Trade (GATT) and now under the World Trade Organization (WTO). It was recognized early on, though, that restricting tariffs wouldn’t help if countries were free to establish a lot of non-tariff barriers.

Non-tariff barriers can be tricky to regulate. They can include legitimate phytosanitary efforts to prevent the introduction of an insect not present in the country, but present in another country, to rules created for the sole purpose of keeping out competitors. So in the area of food safety regulations, the standard agreed to by all parties and enshrined in the WTO is that restriction on trade must be based on science, and the standard is rigorous. The burden of proof is on the country looking to impose a restriction. In the context of the current battle over GMOs, Europe, under treaty, is obligated to prove that’s GMOs are harmful if they want to restrict them.

Instead, the whole effort is an attempt to restrict the choices offered to European consumers in order to placate production interests that would prefer to avoid competition and to placate emotionalism on the part of special interest groups whose very existence depends on conjuring up supposed hazards in the food supply.

Crucial to the ultimate resolution of this problem, though, is the use of preexisting standards. Since we can reference the historic standard – Is this decision based on sound science? – we can ultimately resolve the issue even if the WTO process, with its hearings, consultations and appeals, is cumbersome.

Equally, the problem with the controversy over appellations of origin is the absence of standards on what would merit such an official designation and, crucially, a total absence of agreement on what circumstances would merit the loss of such an official appellation.

Put another way, the problem with the current European position is it is a form of stateism, in which the State is given an arbitrary power to bestow these valuable appellations or take them away. This is a situation certain to produce corruption and the favoring of the politically powerful over the politically powerless.

The great advantage of the trademark process is that even if it is bureaucratic, it is a basically non-political way of resolving these disputes. Want to protect your name? Apply for a trademark. The trademark office asks certain uniform questions – prominent among these is the question of whether a term has slipped into generic use. As a result, the sprout growers of Belgium would fail at trade marking Brussels Sprouts, just like the tomato growers of Rome would be offered no protection by the office in restricting the use of Roma tomatoes.

Even made-up names can be lost to the public domain. The Coca-Cola Corporation has countless people doing nothing but ordering a “Coke” in restaurants that only serves Pepsi. If the waiter doesn’t respond by notifying the customer that they don’t serve Coke, then the restaurants will get a stern letter from Coca-Cola’s attorneys; if the practice continues a lawsuit may ensue.

Why this effort? Principally because such practices are necessary to prevent a trademark from falling into such general use that it comes to denote a generic-category – in this case, cola beverages.

That’s why you get tortured phrases in advertising such as “I drink Sanka brand decaffeinated coffee.” This was an effort to prevent “Sanka” from becoming a generic decaf.

The American bias is for the consumer. It favors a dynamic society in which competition is maximized. To encourage this, trademark standards look to the essence of the question, which is not protection of the ownership rights of trademark owners, but rather consumer confusion. If I produce a cola beverage and call it Jim’s coke, would consumers be confused that they were actually getting a Coca-Cola product? If the answer is yes, Coca-Cola keeps its trademark.

The European approach is standardless; it is the governmental authority bestowing favored status on favored groups. It can only lead to less consumer choice and a more atrophied society.  FDM